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Canadian Foreign Affairs Minister John Baird, left, confers with Prime Minister Stephen Harper in Beijing on Wednesday while standing beside Chinese Premier Wen Jiabao. (Diego Azubel/Associated Press)
Canadian Foreign Affairs Minister John Baird, left, confers with Prime Minister Stephen Harper in Beijing on Wednesday while standing beside Chinese Premier Wen Jiabao. (Diego Azubel/Associated Press)

Globe Editorial

In China, a leap forward by Canada Add to ...

The foreign investment promotion and protection agreement with China is a significant accomplishment, in this respect putting Canada ahead of the United States and Europe. The fruits of Stephen Harper’s visit may not be glamorous – beef tallow is among the topics – but they add up to a surprising success, considering the Prime Minister’s initial reluctance to engage in personal diplomacy with Chinese leaders.

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China is remarkably cautious about trade relationships. It has only a few bilateral free trade agreements: with New Zealand, Peru and Singapore. As for the species of treaty to which Canada and China have now agreed – known in Ottawa dialect by the acronym FIPAs, but elsewhere as BITs (bilateral investment treaties), Beijing has one of these with ASEAN, a group of 10 Southeast Asian countries, but not with the U.S. or the European Union, in spite of China’s huge amount of trade with both.

The Chinese “are pragmatic and skeptical of international entanglements,” says Lawrence Herman, a trade lawyer at Cassels Brock LLP. “So this is a good, indeed very good, first step for Canada.”

The two essential ingredients in a FIPA are that each country “shall accord to investors of the other [country]treatment no less favourable than that it accords ... to its own investors” and that there will be a dispute settlement mechanism.

What has actually happened so far between China and Canada is that negotiations have been concluded. It’s the lawyers’ turn now: to review the draft text.

Undoubtedly, there are exclusions, stipulated by both sides. Canada is not about to open up banks and broadcasting to Chinese investors, or to exempt China from the “net benefit” test of the Investment Canada Act; for that matter, FIPAs are apt to do more for established investors than new ones, as Robert Wolfe of Queen’s University observes.

Since 1989, Canada has been trying to obtain as many FIPAs as possible, and now has two dozen, with 10 more being actively negotiated. Such an agreement with China has been sought for 18 years. This is not the work of the present government alone, but Mr. Harper and his colleagues have achieved this favourable outcome; their rocky start with China seems to be a thing of the past.

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